Hargreaves Lansdown managing director Peter Hargreaves believes the “with-profits shovels” are out again, with some advisers chasing the high commission paid on single-premium with-profits bonds.
Hargreaves says: “Why would you put money in a fund when the assets in which it invests are all depressed and any increase can be held back? This indicates that bonuses will be low and in some cases zero. Surely, the time to use with-profits is when markets are high and likely to decline not low and likely to recover?”
Legal & General last week reported a 133 per cent year on year increase in with-profits bond sales from £48m in the first half of 2007 to £112m in the first half of this year. Prudential has seen a 182 per cent rise in with-profits bond sales in the first half of 2008 to £48m.
Hargreaves says product providers are not widely advertising the product or highlighting increased sales, as they do not want to “rock the boat”.
Richard Jacobs Pension and Trustee Services managing director Richard Jacobs says: “Provider sales representatives say with-profits bond sales have been increasing. The funds that have performed well have been the ones with higher equity content. I am not concerned about the risk that funds take on as long as the consumer is aware of this but there is still a perception that with-profits are safe and cannot go down.”